Ladies and gentlemen, thank you for standing by, and welcome to the Power Corp Q1 2022 earnings call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session. If you would like to ask a question during that time, simply press star one on your telephone keypad. Once you require assistance during the conference, please press star zero. Be advised that today's conference is being recorded. I'd like to hand the conference over to our speaker today, Jeffrey Orr, President and Chief Executive Officer. Please go ahead, sir.
Thank you very much, operator, and welcome everyone to our results call for the first quarter of 2022. I will turn your attention to the Caution regarding Forward-Looking Statements and non-IFRS statements on pages 2 and 3 of the presentation. You will see that with me on page 4 is Greg Tretiak, Executive VP and Chief Financial Officer of the corporation. You have on page 6 of the presentation various documents related to Power Corp, Great-West Life, IGM, and GBL that you can make reference to regarding recent presentations and our quarterly results. Turning to page 7, I would characterize the quarter. Overall, it was actually a strong quarter. We're on track in terms of our business plans. The underlying earnings of those businesses that are earnings-driven were actually very solid.
fair bit of noise in the statements with GBL and with some of our assets at the Power level. Underlying earnings were strong. Markets overall, don't need to tell anybody on this call, in a downfall at this point. You know, that hurts us in the sense that we have a lot of our fees that are attached to market levels across our businesses. We're happy with that business model. It helps over time, but you also live through it when you go through downturns in markets which we're going through right now, and that doesn't put us off at all in terms of our strategies or what we're trying to pursue. It does create some volatility in the earnings.
It also affects some of our seed capital in some of the businesses where we do have investments in seed capital. Other big story, of course, is interest rates that are coming up. Over time, that will help Great-West Life business. Great-West Life runs a very matched book, but as we re-rate business on the insurance side of the business at higher rates, that will be good for returns. Obviously, we're all, like everyone else, hoping that authorities can raise interest rates without throwing the whole economy into a recession and still tame inflation. We'll wait to see how they do on that front.
With that, I'll just also point out on the opening page on seven, we remained active in the second bullet point there with a number of announcements during the first part of the year, including some transactions at the GBL level. We were active in our share buyback program, which we announced and started with 1.1% of the shares having been purchased year to date. Excuse me. I will turn to page eight. You know, the numbers you all know. Our business, when you get in times like this, really underlies and underscores the need for advice and for well-constructed portfolios. That's what we do across our business, whether it's on the individual side or it's on the group side. It plays, you know, into our hand.
It underscores the need that people have. You know, when you have markets going straight up, it's easy and people can get pretty confident about what they're doing. When you get into periods of risk, the value advice becomes even more important. I'm gonna turn it to Greg Tretiak to cover the next few pages. Greg, over to you.
Thank you, Jeff. I'm gonna go straight to page 9, I guess, is the first page here. The only point there is the board did declare a dividend yesterday of CAD 0.495. With that, I'm gonna go to the more detailed slide on the results on page 10. Looking at the right-hand panel, as you alluded to earlier on, Jeff, in your remarks, the earnings that are publicly traded operating companies were strong in the quarter. You can see Lifeco at CAD 539, which went up about 9%. IGM had a record first quarter, and they were up about 8% with their 135. You did speak of noise in the earnings.
At GBL, actually, their cash earnings were up 25%. They were about CAD 28 million. At least our share of that was CAD 28 million versus CAD 22 million in the prior quarter. There was some noise obviously from the fair market value of Webhelp going up in the GBL portfolio. With the fair market value of that asset going up, there is a liability associated with the non-controlling interests who have put rights. In the quarter, that was about CAD 43 million negative. There's a fair amount of noise in GBL's number there. All in all, though, you can see from the publicly traded companies, 686 versus 655.
A good strong quarter in terms of earnings. The other area where there's a significant amount of noise was in our alternative asset management platforms. That was principally generated by the activities in our China Equity Fund, which is managed out of Shanghai under the auspices of Power Sustainable Capital. There you can see that there was a negative CAD 86 million. Of that, CAD 70 million was from losses realized in the portfolio during the first quarter. Those losses are on a realized basis. These are available-for-sale securities in accounting language. Only on realizations do we book anything through the P&L.
You can see in the previous year, there was CAD 255 million of such gains and earnings. Of that, CAD 225 million had come from China when the markets were performing really strong last year at this time. The next item, China Asset Management. A good quarter again with China Asset Management. The CAD 13 million is the same as prior year. However, there was a seed capital mark in the quarter of about CAD 2 million. Their earnings were up in the quarter as well.
In the corporate operations, for those of you who have dug through the MD&A, you'll find that, as far as our operating expenses, they were about CAD 36 million in the quarter. That's spot on with where we basically got our run rate to after our achieving our CAD 50 million in cost savings last year. That rounds out, I think, the comments I'd make on this particular page. Jeff mentioned obviously the buyback in the opening comments, and you can see that our average shares for the period are at 675.8. Go to page 11 quickly. After 3 weeks of AGMs and analyst calls, I don't know that there's any surprises here.
You would have certainly seen most of these names through the publicly traded companies for sure. I'll just make a couple of comments on geography here because in the later slides, we have more color on each one of these investments and holdings. In the Sagard portfolio, of course, is Wealthsimple. Last week at the IGM meeting, they had recorded a reduction in their valuation of Wealthsimple at about 20%. At our level at PCC for PCC's direct holding, that's about CAD 0.22 on the CAD 49.92 net asset value per share number that we have there.
Power Sustainable, the China Equity Fund is in that number, and it's a little over 50% of that number. Of course, it reflects the recent declines in China. Then I think the other one of note is in the standalone businesses, and we have a slide on this later too, which is Lion. Certainly Marc Bédard last week spoke about his business constructively, especially the delivery and the supply chain. With that Jeff , I'd turn it back to you.
Okay. Thank you, Greg. The next, I guess, pages 12, 13, and 14, I will skip over. Most of you on this call will be well aware of our strategy. Just to remind you, we do keep a few pages in our quarterly earnings deck. Quite a lot of people who are, especially new people to the group and new investors, will go to the latest quarterly result to see what's going on. Having some of the standard pages on our strategy puts everything in context. For those of you who follow us regularly, it's old hat, but that's why they're there. On page 15, just a few more comments on the earnings growth at Great-West Life and IGM. You know, as I said, a good strong earnings growth at Great-West Life.
The integrations are on track across the board. I'll talk more about that in a moment. Earnings were a little bit more from Europe and the insurance business in Canada and the US. There's nothing there of any kind of a theme to that. It's just simply the way that the earnings come out in any given quarter. We believe that we're on track with all of our strategies at Great-West Lifeco. IGM had a strong quarter. The first quarter is one that I find The Street tends to underestimate or overestimate kind of consistently. I'd like to go back and do a study on that. I'm pretty sure I'm right. You know, fees are collected on a daily basis.
Compensation and trailers are paid on a monthly basis. About 2 less days in the first quarter, it sounds silly, but that's like several million CAD. It can account for a few cents. Then there's seed capital, of course, particularly at Mackenzie. When you get a down market, you get a mark on the seed capital. That, you know, accounts for most of the noise. Basically, from our perspective, it was a strong quarter from an earnings perspective. In terms of the flows at IGM, you know, the whole industry now, you'll see from effect numbers, and not surprisingly, given the volatility and the weak markets, you're getting weaker flows into investment products. IG Wealth continues to progress, and we're really pleased with the strength of that franchise.
We sort of telegraphed it last year that we thought that there was momentum building, and we certainly saw that with continued strong flows relative to the industry overall at IG Wealth. That's the comment on those two companies. A quick comment on the brand. You know, on page, I'm on page 16 now. We launched the Canada Life brand, you know, not that long ago, and in a recent survey of the value of brands, it was ranked in the top five brands in terms of value. You know, that's the first time an insurance company's ever been in that position.
Really pleased with the way that we have consolidated the three brands into one and the rollout of that brand, and we look for more brand equity being built in the future around Canada Life. On the right-hand side, this is a J.D. Power investor survey, and it just points out IG Wealth is doing well, and it underscores the comment I just made. This is the highest that I've seen IG Wealth in a long time from an investor survey, in this case, higher than the full service branch or full service investment banks owned by the Big Five banks and the industry average overall. Just another little touch point and evidence point of the progress being made. Page seventeen. You know, obviously, we've been talking a lot about Empower. We're extremely excited about Empower.
The quarter was affected by lower markets. It was also affected by a build-up of some expenses on the sales side, on the retail side. We are rolling over and integrating the tools from Personal Capital into Empower's DC business, but also its retail business, where they have retail clients that they bring over from the DC platform. There was a big build-up of sales staff during the first quarter, advisors in IFIC, and without the corresponding revenue, so that impacted the business. I think the company made the point during their call, but just to repeat it, the synergies on the MassMutual transaction are gonna be a little bit barbelled.
When you first have a transaction closed, you have a number of initial surveys related to staff and other expenses you can save. Then you run on multiple systems. The employers and the employees of MassMutual migrate in waves. There are eight waves, I believe, done over time. It's not until you've migrated everybody that you can turn all those systems off, and you've got a lot of payments you're making to MassMutual for keeping the systems alive. The synergies tend to be barbelled. The $160 million that was announced by Great-West Life and Empower, the company is right on track with the progress that's being made there.
As I mentioned, the really exciting thing is we're starting to take the Personal Capital tools and roll them into the Empower DC platform, the Empower retail platform, and they're starting to get turned on, which is, the team's pretty excited about that. Okay, page eighteen about the retail business of Empower. You see that, on the left-hand side of the page, we now with the acquisition of Prudential, 17 million Americans in our plans, $1.4 trillion in those plans. About 6% of that is eligible to roll into retail accounts every year by people who change jobs, who retire. You've got the ability to go out and reach into their individual savings and investing accounts that are outside of the plan.
That drives a big potential retail opportunity that we are trying to take advantage of and serve our clients in a more complete way. On the right-hand side of the page, on the dark blue, you see the build-up of our efforts in that regard, going from $5.5 billion up to $25 billion at the end of Q1 2022. In the light blue at the top, you see the addition of the Personal Capital direct to consumer business that we purchased. We now have a business which at the end of the first quarter is a retail advising wealth management business of $48 billion. You'll see even in the first quarter, the markets were down, and we had growth in the assets under advisement there.
You can understand there were good strong net flows through the quarter in those businesses. We've said and Great-West Life have said on the roll-up of the DC platforms that we've been doing, if all we do is create a bigger, more profitable DC business, those transactions will be successful strategically and financially. If we can really execute on the wealth management strategy, which will take longer to execute, and we have to, we have to prove we can do it, then those transactions will have been really, terrific value creators for the company. With that, I will turn to page 19. Greg mentioned the point at the top. We just wanted to emphasize, you know, the underlying. From GBL's point of view, they look at cash earnings and NAV.
They're not particularly earnings-focused with their own shareholders, but we end up reporting their earnings. The cash earnings were up 25%. They are involved in their own buyback program. They are also, their strategy in part is to pivot to more private investments in a number of high-growth sectors, including healthcare. They invested CAD 1.75 billion in two private healthcare businesses after the end of the quarter. They were both announced in April. I think it's 25% of their NAV is now private as opposed to public, as a consequence of those investments and what they've been doing. Very good progress at GBL. China Asset Management, I think you've seen most of this slide.
One thing I will point out is under the first bullet point, and if you're on the IGM call, they would have talked about it as well. China announced, as subsequent to year-end, the rollout of their third pillar of their pension system. To remind people, the first pillar is government-provided pension, second pillar is employer-based pensions, and those have both been in existence in China. The third pillar is tax-assisted individual savings. Think of RRSPs in Canada, think of you know investment IRAs in the US. That has not existed heretofore in China. We think it's gonna really open up the market. We think companies like ChinaAMC are gonna benefit hugely, and they announce rules to roll that out.
It'll take some time, but they've got a number of pilots going on. We think there's 1 billion individuals who could potentially make contributions. This is a big deal long term to the prospects for ChinaAMC. Staying on page 21, staying on the China theme, Greg talked about the fact that we had some impairments in our China portfolio. I think the China market, the index was down first quarter, 20% in the first quarter. I think that's the first quarter. I don't have it in front of me. It might have been the first four months, but down, big time. You can see it on the chart.
Of course, the way we account for that, if there are any realizations or any impairments, we don't fully mark-to-market, but those could flow through the P&L. We had some losses, as Greg mentioned, in the first quarter. This gives you the history of our initial CAD 50 million investment in 2005. We've taken dividends back. The portfolio was some CAD 900 million at the end of the year. It's down from there, of course, today. This has been a great return for Power Corp. It's also now strategic in that we're bringing third-party investors in. The track record of the team, you can see it referred to above, 5% in excess of its benchmark. That is both through security selection, sector selection, and asset allocation. They will go to cash.
They have an active asset allocation methodology, so they'll go to cash when they think that the market is overheated. Moving forward, I won't spend any time on 2022. You know all of that. It's there kind of as a standard boilerplate on our strategy. On 2023, I'll just point out that when you look at our alternative asset management businesses and you focus on—not on the GPs, but on the seed capital that we have invested, which we have about CAD 1.9 billion in NAV supporting those strategies, you can break them down in terms of how the earnings get realized through kind of two overall groups. There's capital appreciation strategies, so that would be private equity, venture capital, and the China portfolio.
We'll tend to realize those gains as they're incurred. The overwhelming way we would recognize the gains is when there's a disposition. There can be impairments, but in the ordinary course, it's gonna be episodic when we realize gains on that. Then you've got income strategies at the bottom of the page, private credit, royalties, energy infrastructure, and real estate. These are targeted returns as well. Just a little bit more on our capital underpinning the seed capital and our commitments and how the earnings will emerge. We turn to the alternative asset management business as a business, i.e., the GP, the asset managers themselves, where we are looking to earn recurring fees.
You've got, in that at the top of the table on the left, you've got Sagard, in the first quarter, CAD 34 million in management fees. Not quite at break even. There's a little bit of noise in the CAD 38 million on the tax side. They're actually closer to break even than on a run rate basis than the quarter. Then you got the net carried interest. We look at that third line, kind of how are they doing on fees, less expenses, and then the carry can go up and down depending on realizations or marks. Then you got the same thing for Power Sustainable Capital. On the right-hand side, I think you've seen these charts before, up to CAD 19 billion in funded and unfunded AUM. Now, the fee-paying capital is not 19.
You've got it on the last bullet point. It's 11.4. As you're probably aware, in these businesses, you don't get paid on the appreciation of the asset value. You get paid on the initial commitments. In some cases, you get paid on uncommitted, but for the most part, you get paid on committed capital, not uncommitted capital. On the bottom right-hand side, you will see the very substantial progress that we've made and the growth of these platforms has come from parties other than Power. In fact, we've reduced our commitments to seed capital through various sales, which is the strategy that we explained to all of you and which we're executing.
Just very quickly on page 25, second bullet point, continued with some good fundraising in the first quarter, the year-to-date, CAD 763 million year-to-date, including into the first quarter, and you get the breakdown by strategy on the bottom of the page. On page 26, Lion is one of our standalone businesses. Market value on technology companies, of course, has come off for some period of time right now. Companies that are in development where they've got revenues but no earnings for the foreseeable future. Interest rates are going up. Those get discounted back at a lower level. Market has been turning away from those investments and they've sold off. That's been the case with Lion in terms of its market value. The business we think is going really well.
It's a very strong business. At some point, we will, you know, look to be realizing value, but at this point, our strategy is to make sure that the company continues to succeed and we realize the appropriate value. They're doing great progress and really continuing to build out their business. We're pleased with the progress at Lion. Page 27 talks about buybacks. I think I mentioned earlier in the presentation, we bought back 280 million shares year to date, including 105 million subsequent to the quarter end. We've got CAD 1.2 billion in terms of available cash above the minimum 2 times fixed charges that we use as a guideline. IGM has been doing its own buyback, and GBL is also active in doing.
Then finally, before I roll it up, follow our discount here, we're on a dogged pursuit to continue to simplify. As we do so and continue to create value, get more people who understand what we own. We are convinced that discount can narrow in from where it is. It won't go in a straight line. They never do in the markets, but we think we've got lots of room to create value through narrowing of the discount. Page 29, you've seen before. It is a placeholder for overall our strategy. With that, operator, I will conclude my remarks and ask you to open it up to questions from people that are on the line. Operator?
Thank you, sir. At this time, I would like to remind everyone, in order to ask a question, press star one on your telephone keypad. Again, that is star one to ask a question. We have your first question from Graham Ryding with TD Securities. Your line's open.
Hi, good morning or good afternoon, I guess.
Good morning.
Just maybe some color on, you know, given the volatility of the markets, does that sort of change your outlook at all for fundraising on your alternatives platform? Is that a bit of a near-term headwind, perhaps? Maybe some color on what are you looking to, you know, what funds, what strategies are sort of actively fundraising this year? Do you have any targets out there or anything?
It's a very good question, one we're asking ourselves, Graham. Generally speaking, when markets aren't as strong as you know, people are putting less capital to work. It'll be interesting to see on the private side whether that's true or whether we continue to see a lot of flows into private markets. Most of our strategies, with the exception of China, are in private securities. We're asking ourselves the same question. It's a risk that we get into, you know, really weak economic conditions. I think that we want to be putting the money to work historically in some private equity type strategies when markets are weak, but that doesn't mean investors will necessarily act that way. I do think there'd be some uncertainty in the short term on what's going on in China.
That's not, you know, that's a bit of a headwind in terms of fundraising there, even though we've got a great track record. You know, I guess you're asking me a crystal ball question, and I'm not quite sure. We are asking ourselves the same question. It doesn't change what we're gonna do. We'll move through. If we end up with choppy markets for a period of time, we'll just navigate through them and drive on with our strategy. Fundraising is going on broadly. We've launched at Power Sustainable Capital, we launched a new sustainable ag fund. There's active fundraising going on right there. Sagard across its platforms is fundraising. Back to Power Sustainable Capital, they're looking for more assets to roll into the infrastructure fund. It is pretty broadly based.
I don't think I've got any particular comments as to where there's a focus. We'll wait and see how it goes. Sorry, can't be more specific.
No, that's fine. No, that's good color. Would you consider or are you actively looking at, you know, potential tuck-in acquisitions that would add scale or maybe some further product breadth to that platform? Or should we expect more just block and tackle organic growth as the focus?
Yeah, I think that, we did that in Sagard Holdings, of course, with EverWest. Now that was through Great-West, but there was a real synergy there. I think we would be open to getting scale through acquisitions. Having said that, I wouldn't want to create an anticipation that we are about to announce something like that. We are open to that. You know, when you launch new strategies, you go through, you know, two years of a J-curve where you've put the people in place and you got losses, and then you get assets and start to get the fees building and build up. You go through losses for two years. If you buy a team with assets or an existing business, then you get P&L right off the bat.
It's more friendly from a shareholder point of view, and it gives you scale. You know, we would look for those opportunities, but they've got to be the right opportunities. They have to fit culturally, they've got to fit into the product shelf. We are open to that, but we don't have anything pending that I would want to talk about.
Fair enough. Have you disclosed or would you disclose what your actual ownership stake is in your alternatives platform? Because I know you have, I think, management-owned piece, and I think Great-West probably owned the piece after that EverWest transaction.
You know, flip to Greg. I have no problem disclosing it. I want to make sure I don't answer the question if we haven't disclosed it already because I don't want to get ahead of ourselves here on a call like that. Greg, I'm going to ask you the question on our level of disclosure in terms of our ownership. The management ownership. I'll generally comment that it is public. Management owns stake in each of Sagard Holdings and Power Sustainable Capital. Great-West through the EverWest transaction came in for, I think it's 8%. So there's some dilution there. Greg, I'm going to ask you to answer the question in terms of disclosure of our ownership positions in each of Sagard Holdings and Power Sustainable Capital.
It's in the MD&A, Graham. I don't have a page number for you, but I'm sure I could get one. 20. There you go. Lifeco's got 6.6% in Sagard right now. Of course, management has an interest as well. 9%.
Perfect. Okay. That's helpful. That's it for me. Thank you.
Thank you, Greg. Thanks.
Again, if you would like to ask a question, press star one on your telephone keypad. Again, that is star one to ask a question. We have your next question from Geoff Kwan with RBC Capital Markets. Your line's open.
Hi, good afternoon. Just had one question and maybe expanding a bit on Graham's question on M&A, because Geoffrey, you talked, I think it was a little while ago that you felt that the heavy lifting was complete in terms of improving the fundamentals at Great-West and IGM, and you were being able to focus more time on M&A. You know, unless you want to offer up some specific things that you're looking at, but just, you know, how would you describe the progress you've made on potential acquisitions? I know you talked about maybe nothing imminent, but just, you know, where you're seeing opportunities and what you've been maybe looking at.
Also given what we've seen in the markets and interest rate movements, is that impacting any sort of processes you're looking at in terms of acquisition multiples and things like that?
Yeah. Good question. If I start with Great-West Life, you go through phases, Jeff, when you're looking at M&A, and we spent, you know, $10 billion at Empower, CAD 10 billion over announced deals over 12.5 months between, I think it was August of 2020 and August of 2021. That did 2 things. The team at Empower now has 3 integrations going on simultaneously, and the leverage ratios at Great-West Life need to come down as we get the cash flows from those transactions. We went through a phase of rapid execution on getting the deals done, and now there, by necessity, needs to be a period of focus on executing on the transactions.
We're executing well, but it's, you know, it's a lot of work on the team. That would continue to be an area of high priority. We do think that the U.S. DC and adjacent wealth management opportunity is the biggest opportunity I think we have across the group. It is. I do think if we execute on it over time, we'll really change the whole makeup of Great-West Life. You know, I'm looking several years out here, not looking in a year or two, but I think it really changes the profile of the company's earnings, and we end up with, you know, I think it'll be a branded franchise in the U.S. if we succeed at it. That's going to be the priority at Great-West.
I think we're at a point where, as we look elsewhere across Great-West Life, where do we have capital that is either not earning adequate returns or where the market is not valuing the earnings properly, are areas that we would be looking to potentially not have as much capital in. You know, I've talked about this before as well. We're long-term shareholders, but we have been introducing a discipline to a far, I think higher emphasis of looking through everything we do through the eyes of the capital markets. Great-West is looking at its portfolio to say, you know, do we have too much capital in businesses where the market is, you know, is not appreciating or is not prepared to pay for those earnings levels. That's not a direct answer to your question.
That's kinda all I'm going to say on Great-West. We're always looking at tuck-ins across the board. We'll continue to do that, whether it's Ireland or the UK or in any market we're in, always looking for synergistic deals, but the priority is going to be around Empower. When I turn to IGM, it is very interested in creating and broadening out its wealth management footprint. It's got IG Wealth, which is the big money earner right now. It's got ambitious plans for IPC, and Blaine Shewchuk has taken over leadership there. It would like to have a bigger presence in the high net worth market, completely aside from what IG Wealth Management is doing to move upmarket with its consultants, but really in the high net worth market.
To your question, multiples have been numbnuts. Sorry, I don't know if that's a financial term, numbnuts, but it's the one we use. I mean.
I get it. Don't worry.
Yeah, they're just trading at multiples that you go, that's great, but like, why bother? So we hope that maybe a down market will bring some of those things back to more realistic levels, and we can start to get active. You know, your question, this is not an answer to your question, but I did not mention in my comments, and I should have, as I'm on IGM, I mentioned Blaine Shewchuk. You know, in the quarter, very significant leadership changes at IGM with the retirement of Barry McInerney. We've got Luke Gould taking over as head of Mackenzie. He's gonna be great, and he's been around the company. He's well known to all of you. And then we got Keith Potter moving in as CFO and Kelly Hepher moving over from Great-West as chief risk officer.
Lots of good management changes at IGM we were really pleased about. I neglected to mention that while I was making my comments. Jeff, back over to you.
Perfect. That was all the questions I had.
Okay, thank you very much.
Again, if you would like to ask a question, press star one on your telephone keypad. Again, that is star one to ask a question.
Operator, did we lose you, or is there no further questions?
I'm showing no further questions at this time. Please continue.
Okay. Well, I don't have anything else to say. I can talk about what I had for dinner last night, I guess.
We can go to dinner now.
Well, we could go. It's a little early for Frank.
Well, it depends on where you're having dinner, Jeff.
That is true.
Thank you.
We'll just give another 30 seconds in case people are trying to get on the line.
Again, if you would like to ask a question, press star one on your telephone keypad.
Okay, I think we're good, operator. I think if there haven't been further questions at this point, we can probably terminate the call. I'd like to thank everybody for joining us today and wish you a pleasant afternoon. We'll talk soon. Operator, that would do it for the call.
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Thank you.